Expert: Eric Forster - 6/2/2004

Question
I am considering becoming a first time home buyer within a years time.I live in Houston, Texas. I am a flight attendant and will make about 37-38k+ this year. I just recieved a $5.00/hr raise this December which raises my income by about $5,000/per year.Last year with my per diem, I made about 31k+. I applied for a loan last year and was offered a 19% loan. Of course I did not accept this. My credit score is 725, I have not been late on any payments since 1998 when I was changing careers and had late payments on some credit cards. I was told that my debt to income ratio is the reason why I was offered this ridiculous rate. The loan officer would not count my per diem which easily equals about $5,000/per year or more. He said he could not count this into my yearly income since it was per diem. However, I recieve per diem every time I fly and it is paid every month as part of my salary and virtually untaxed. I have $13k of debt to include 2 credit cards and my car loan. Do you think that  I should be able to qualify for a decent home loan? I do not have any savings. I was off for 4 months with a wrist fracture and used all of emergency fund. Any hope for me or should I pay off all of my debt before even trying to apply again? I pay $600.00 per month in rent plus bills. Would it be best to owner finance or lease to own instead of trying for a conventional loan? Please advise.

Answer
Dear Rosemary,

Some lenders will count your per diem as part of your income (try Bank of America's or Wells Fargo's First Time Homebuyer programs). Most will not.

Based on the numbers you've provided, you should be able to qualify for a loan of $100,000 - $115,000. In my part of the country (Los Angeles), where the lowest priced condos start at $300,000, that wouldn't get you much; but it could be a different story in Houston.

As to your last question: Owner's financing and lease-to-own have always been a viable alternative to bank financing, and should be used when bank loans are not available.

Best wishes,

Eric